MARKET PULSE
😰 The S&P Nears a P/E of 30x, A Number Last Seen Before the Dot-Com Crash

☀️ The ‘summer rally’ continues, blessing us investors with warm weather and even warmer returns. Across the major indexes:

• The S&P is up +0.94%

• The Canada TSX index is up +0.63%

• and the Nasdaq-100 is up +0.35%

⚠️ But as the markets continue to soar (despite tariffs, poor job numbers, and other weak economic indicators)… headlines across major news channels read like warning labels:

• From Fortune yesterday: How investors should be thinking as the stock market nears a P/E ratio of 30—a number that spelled disaster before the dotcom crash

• From the New York Times yesterday: The Stock Market Is Getting Scary. Here’s What You Should Do.

• From Yahoo Finance today: Why Goldman Sachs says the 'Goldilocks' stock market may get hit

🤑 So, Is the Stock Market Overvalued or Not?

📊 One of the biggest concerns is that the price-earnings ratio of the S&P has nearly hit 30x.

🤑 And in case you’re unfamiliar with the term, the price-earnings ratio is essentially a measure of how expensive a stock (or market) is. So the increase in the S&P 500’s PE from 24× two years ago to 30x now means that the valuations of the market are growing more rapidly than the earnings of the underlying companies.

🫧 Some are even calling out that the last time the market reached these levels was in the dot-com bubble, after which the S&P 500 fell by -40% from 2000 to 2002.

🧠 Now, on any given day, you can always find headlines spelling out doom and gloom, and my goal with flagging these articles is not to do the same.

⏰ As the adage goes (and the data shows), time in the market beats trying to time the market - but it’s important, especially for newer investors, to understand the risks.

📈 When the market goes up and up and up, our portfolios can feel invincible, and two things start to happen:

• Beginners start shifting to riskier positions, feeling FOMO of the returns other people are getting

• ‘Experts’ start popping up, pushing riskier and riskier positions which may be profitable in the short term but expose you to significantly more risk (in some cases, this may be malicious, but oftentimes they’re just falling into the same trap as everyone else and begin to think they’re geniuses).

🌼 Since Blossom is a social network for investors, these effects can sometimes be amplified, so I feel it’s especially important to call them out.

🧐 So What Should You Do About It?

🎯 The takeaway here isn’t to sell everything and give up on the markets, but I encourage you to take 5-10 minutes today to think about how much risk you’ve taken on with your portfolio, and whether you could stomach a market correction if/when one does happen.

✅ If you’re investing for the long term and have kept yourself thoughtfully well-diversified, the answer might be yes, and no action is needed.

😰 But if you’ve fallen into the FOMO trap of heavily increasing your risk exposure, or if you have a shorter time horizon (i.e., you want to buy a house in 1 year), then just make sure you’re aware that you’re taking a bit of a gamble on the good times continuing.

💡 To wrap up this section, consider the words of legendary investor Warren Buffett (referring to how non-diversified investors can seem like geniuses in the short-term but then get burned in a bear market):

👀 And speaking of Buffett, Buffett announced some big buys and sells this week, so let’s take a look at how he’s positioning his portfolio in these markets…

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TOP STORY
🚀 United Health Soars +20% After Buffett Buys $1.6B Stake

💰 As the market has soared to all-time highs, legendary investor Warren Buffett has been sitting on the sidelines quietly building his cash pile to a record $348B, over 3 times the levels of 5 years ago:

🎯 Many have said this is because Buffett, known for his value investing strategy that seeks to buy undervalued companies, has struggled to find a meaningful opportunity in these frothy markets.

🏥 Well, that changed this week with Buffett investing $1.6B into United Health ($UNH) - his largest new investment since his $4.1B stake in Taiwan Semiconductor ($TSM) in 2022.

⭐️ A ‘Classic Buffett’ Move

😬 UnitedHealth has faced its fair share of struggles lately, with federal investigations, lower profit forecasts, and even the 2024 murder of its CEO, causing the stock to plummet -60% since April.

🎯 But that’s exactly the type of plays Buffett goes for, quality companies that appear cheap due to recent setbacks. As the stock has fallen, it’s Price-Earnings ratio has also fallen to 13x, its lowest level since 2014 - a signal that the market may be undervaluing the company.

✅ Buffett also tends to purchase businesses he understands, and Berkshire Hathaway is the parent of a number of insurance companies, so UnitedHealth is right up his alley.

📈 As typically happens when Buffett buys, the stock soared on the news, jumping a massive +19.7% in the past week.

💊 And Buffett isn’t the only one paying closed attention to Healthcare stocks - analysts have also pointed out that Healthcare, the worst performer of the S&P 500’s 11 sectors this year, may have some hidden pockets of opportunity, with JP Morgan saying that “it now trades at a substaintial discount” to the S&P 500 and highlighting how the latest government jobs data showed that almost all of the new jobs are coming from the healthcare industry.

💰 Other Buys

A few other significant buys included

• A new $860M investment into steelmaker Nucor Corp ($NUE), sending the stock up +5% this week

• A new $780M investment into homebuilder Lennar Corp ($LEN) sending the stock up +8.6% this week

✨ Both highlight Buffett’s preference for real assets over hype amid the tech boom.

👀 Net Sales for 11 Straight Quarters

Despite these buys, Buffett still sold more than he bought, trimming positions in Apple by -7% and Bank of America by -4% (which, for context, equals over $5B in selling just from those 2 stocks alone).

📊 Even with all these moves, Buffett’s top 5 holdings are the same as they were a year ago, although they have now dropped from 73% of his portfolio to 70%:

• 🍎 Apple (AAPL) - 22.31% of portfolio (down from 30.1% last year)

• 💳 American Express (AXP) - 18.78% (up from 12.5% last year)

• 🏦 Bank of America (BAC) - 11.12% (down from 14.7% last year)

• 🥤 Coca-Cola (KO) - 10.99% (up from 9.1% last year)

• 🛢️ Chevron (CVX) - 6.79% (up from 6.6% last year)

💡 Most notable is the big drop in Buffett’s Apple position, with Buffett trimming this position for 7 quarters in a row.

💰 Famously, Buffett will only buy if he feels like he’s getting a good deal, so as his cash pile continues to grow and valuations continue to soar, some investors take it as a bad omen from the ‘Oracle of Omaha’.

IN PARTNERSHIP WITH MOOMOO
😎 Blossom Visits Moomoo in New York!

😎 Speaking of moomoo, this last week me and Tim had the pleasure of being invited to New York to see the Mets play in the moomoo suite and visit the Nasdaq as part of moomoo’s creator summit!

📱 As part of the event, moomoo highlighted a bunch of cool new features on their app that I didn’t know about, including:

• 🤖 Moomoo AI, which gives earnings analysis, trading data, and a brief of the key events influencing a stock

• 🔎 Short Sale Analysis, including charts of the short interest trends over time

• 🐻 Analyst ratings and Morningstar research (including breakdowns of ‘what the bulls say’ and ‘what the bears say’)

• 📊 PE trends over time compared to peers

• + many more…

💡 Definitely worth checking them out if you haven’t already - here’s the link to create an account!

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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